Infibeam Interview: Tier 2 & 3 drive 50% sales, Aims to get profitable by FY 2013-14

Ecommerce in India has been gearing up for the much needed consolidation as VCs money and interest is drying up in the segment. While higher spend on consumer acquisition and thin margin continue to elude ecommerce players from profitability, Ahmedabad and Noida based Infibeam claims to have its consumer acquisition cost very low and expects to have break-even on cash basis shortly (by the end of FY- 2013-14).
Currently, the company claims to make positive gross margins with every transaction, however net profitability or  break-even on cash basis is still a distant dream. In 2012, Infibeam grew 15-20% month on month and added more than 13,000 implementations on its SaaS based platform-  Buildabazaar that enables merchant to open their online store.

To understand more about Infibeam’s business in past year, projection in 2013 and importantly its growing ambition to hop onto marketplace model including road ahead towards profitability, NextBigWhat spoke to Manu Midha, VP, Infibeam.

According to Midha, Infibeam and its B2B platform Buildabazaar contributed almost equally in overall turnover of the company in financial year 2012-13. Sensing big opportunities in marketplace model through well performing Buildabazaar, Infibeam intends to get into pure marketplace play. Edited excerpts of the interaction:

NextBigWhat: How has been the year 2012 for InfiBeam in terms of orders, revenue and traffic?

MM: Orders, Revenues and Traffic increased multiple folds in 2012. We grew at ~15-25% month over month in terms of customer volumes and our DIY cloud based platform Buildabazaar has been extended to small and medium retailers.

The platform allows any retailer to create their own online presence and manage their entire ERP to manage store using our infrastructure.

Our marketing spend and customer acquisition costs continued to be very low and most of our growth came from repeat purchase and new customer additions.

NextBigWhat: There was some news (in Jan-Feb 2012) about InfiBeam looking to raise funds from venture capitals (VCs). What happened to that? Are you still planning to raise funds?

MM: Infibeam is well capitalized and there are good internal accruals; we continue to forward invest and take educated bold bets. Earlier same time last year, we  opened our cloud based platform Buildabazaar and were pleasantly surprised with the acceptance. Last year alone, we added more than 13,000 implementations on our platform. Internal accruals and additional investments continue to be deployed in growing our technology, warehousing and logistics base.

FDI in eCommerce is not allowed as per government policy and we closely follow the regulatory guidelines. Over these years, we are very proud of having built a company culture in doing more with less, focusing on innovation, building efficiency across functions, and pass savings to customers. Late last year, we extended our cloud platform to services; launched digital music under the brand name INDENT and secured large contracts from large and small music labels to build streaming and download products across web and mobile.  We believe this year, we will continue expanding our platform to other services.

NextBigWhat: We have heard that InfiBeam has been making positive gross margin with transactions. What is your take on this and how long InfiBeam needs to reach the break-even point?

MM: Based on our current financials, we have positive gross margins but do not make net profit. Our accounting practice is conservative and we expense out all our technology and marketing spends.

We will continue forward investing and hope to break-even on cash basis shortly. In terms of profitability, we aim to achieve by the end of upcoming financial year (2013-14).

NextBigWhat: Through BuildaBazaar, InfiBeam is listing manufacturers, offline retailers on its platform. Tell us about number of sellers on InfiBeam via BuildaBazaar and is there any plan to pivot to or launch a marketplace model?

Yes. We do plan to expose marketplace to more sellers via Infibeam, including merchants on Buildabazaar,  in the coming months. For marketplace, there are big RBI compliance requirements on payments, settlements and other regulatory frameworks and we continue working on the same. You will hear more about this shortly.

NextBigWhat: What  has been the progress on music service, Indent?

MM: There are several music labels that have signed up to build their offering using our music service.The mobile abstraction of the buildabazaar platform allows labels to build their applications across multiple operating systems and screen sizes.

Many of the products launched for specific labels are being bundled with OEMs and Indent powered and launched applications will be available for customers to use across different music genres.

NextBigWhat: What is the average transaction size, orders split across metros and tier 2, 3 cities, margin etc.

MM: Our average transaction size is around Rs. 1,500 per order. Tier 2 and 3 cities account for more than 50% of our sales. We are seeing this number for tier 2 and 3 cities increase as more consumers go online.

NextBigWhat: Future plans and projections (regarding revenue, orders etc) for InfiBeam in 2013?

MM: We believe this would be a defining year for e-commerce and us, as we would see consolidation as well as growth in the Industry. We expect revenue, orders and overall scale in the year 2013 will increase multiple fold.

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